In our interview this week with portfolio manager Mary Lisanti of AH Lisanti Capital Growth, she pointed out to us several companies that she’s located that are, in fact, benefiting from the global financial crisis and downturn in the markets:

1. Constant Contact (CTCT)- “Constant Contact is an e-mail marketing system for small businesses, keeping them in close touch with existing customers and even adding new customers. Increasingly they are also being used by large corporations because they are incredibly cost effective. The return on investment is about a month and a half and puts an immediate payback (past performance is not indicative of future results). It’s a very effective product in the current environment.”
2. Data Domain (DDUP)- “Data Domain does virtual data storage. This means their clients don’t have to buy another server, but instead use this software product to leverage space on their existing server. Data Domain has a very good management team and we think they’ll be one of the companies that will prosper going forward.”
3. Concur Technologies (CNQR)- “Concur Technologies…provides corporate expense report management and travel procurement software which has a very quick payback return on investment of a couple of months and clients end up saving a significant amount of money. We look for the management team to really understand the challenges they are facing. We talk to them about more theoretical scenarios to get a sense of how they are running the business and we want them to balance the long term and short term. We believe they are in a good position as we come out of this to really gain some significant market share.”

For the complete Investing Strategies report, including the complete interview with Ms. Lisanti as well as interview with portfolio managers from a variety of investment styles and focuses, click here.

Eric Jackson, the activist shareholder, who waged an earlier Internet campaign that helped bring down Yahoo’s former CEO, Terry Sempel, wrote a fascinating piece yesterday on Seeking Alpha.  Jackson focused his column on Sidney Finkelstein, the Steven Roth Professor at the Tuck School at Dartmouth College who is considered an expert on what makes for successful top executives.  Jackson briefly discussed Finkelstein’s earlier book, Why Smart Executives Fail and his newest book, Think Again: Why Good Leaders Make Bad Decisions and How to Keep It From Happening to You about to be released, and which he co-authored with Jo Whitehead and Andrew Campbell.    

Jackson went on in the piece to interview Finkelstein to get his take on the problems we are facing today and why CEOs and their boards have often failed in their responsibilities to shareholders and their respective companies.  Check it out, Finkelstein offers a number of enlightening assessments of today’s financial predicament.

Our top picks this week come from our special focus on Oil & Gas Exploration & Production. Here’s what the analysts we spoke to picked in this space:

1. Carrizo (CRZO)- “Carrizo, which is a gas-oriented name here…has a fairly dramatic growth profile, which we think is being underappreciated, given financial concerns.”
2. Whiting (WLL)- [Whiting is an oil company with]  “a high cost model but it does have some growth catalysts on the liquid side — carbon dioxide flood activity and some other efforts in the Bakken. And given that it’s a high cost model with a lot of financial leverage, if indeed we start to see some constructiveness in the context of the oil market, that’s going to be a name that has been beaten up badly that could have a nice rebound.”
3. XTO Energy (XTO)- “XTO Energy continues to be a name where we see very good, relative-to-the-industry economic growth.”

For the complete Oil & Gas Exploration & Production issue, including a complete overview of this space, where it’s headed, and more stock picks, click here.

The Financial Times (registration req.) is running a fascinating and apropos Special Report on Managing in a Downturn.   The Report is broken into a series of parts.  If you are a manager or you are examining the management of a specific company the below stories are worth a read.

1. Time for managers to stand and deliver
2. Keeping the global economy afloat
3. Seizing the upside of a downturn
4. The perfect storm  
5. Managing fluctuations  
6. Japan: Hubris, denial and the loss of confidence  
7. Scandinavia: Failed banks, state control and a rapid recovery  
8. Lessons from the 1997 Asian economic crisis  

Check them out. 

Ken Lewis, BofA’s embattled CEO who was responsible for BofA’s questionable acquisitions of Countrywide and Merrill Lynch is expected to survive today’s BofA board of directors meeting.  According to the Wall Street Journal,

“Lewis’s job is in no danger,” a person close to the board said Friday.       

Whether he survives or not Lewis will remain on the hot seat for some time.  While both major acquisitions were favored by the government, at a minimum, Lewis has failed to manage the acquisitions and deserves to be forced out.  Rob Cox and Anthony Currie of Breakingviews.com yesterday, which appeared in the New York Times, summed up Lewis’ predicament and concluded,

Corporate executives must accept responsibility for failures if they’re to keep their shareholders’ trust. When they don’t, it is up to the board to make sure blame is apportioned appropriately. Lewis hasn’t come clean. BofA’s board must go.       

I agree but suspect the prevailing view that Lewis will for now remain at his post is correct.  Stay tuned.  For more:   New York Times  Bank Investment Consultant  Bizjournals.com  Bloomberg  AP  NY Post  Charlotte Observer  Clusterstock  Forbes (update)  Guardian UK (update 1/29)  Charlotte Observer (Update 1/29)  

Our special focus this week is on Oil & Gas Exploration & Production. One of the analysts, Phillip Dodge of Stanford Group Company said in our panel discussion of this space that, despite the turbulence and downturn in this space in the last year, we have seen the bottom:

Mr. Dodge: I think we have seen bottom. Many companies have cut back significantly in their budgets for 2009 with the approach that they can stay within their cash flow if prices remain low, but they can keep the flexibility to raise spending later in 2009 if prices recover.

TWST: So it’s like trying to straddle a fence.

Mr. Dodge: Yes, I think it’s probably a good approach. They don’t want to try to forecast prices so they will live within their means unless prices recover.

For the complete Oil & Gas Exploration & Production report, including interviews with analysts covering many parts of this space, stock picks, and a full roundtable discussion, click here.  

Cardionet BEAT (NASDAQ) the medical device company that provides a wireless method for diagnosing and monitoring cardiac arrhythmias announced that Arie Cohen, the president and CEO of the firm since November 2007, was leaving the firm to pursue other opportunities.  The announcement came shortly before the company’s conference call on quarterly earnings.  The company’s board announced that it’s executive chairman, Randy Thurman, would become the interim president and CEO.   It has also initiated an executive search for a permanentCEO  replacement.  According to the company’s press release,

Thurman most recently served as Chairman and CEO of VIASYS Healthcare Inc., a global medical technology company that was acquired by Cardinal Health in June 2007 for $1.5 billion. From VIASYS’ successful IPO in 2001 to 2007, Mr. Thurman spearheaded an aggressive growth strategy that increased the Company’s revenues from $320 million to $700 million and positioned the Company to consummate twelve strategic acquisitions over a six-year period.   

… Prior to VIASYS, Mr. Thurman was Chairman of the Board and CEO of Corning Life Sciences, a diversified medical technology company with a focus in contract pharmaceutical research, contract biologic manufacturing and clinical diagnostic testing. Earlier in his career, Mr. Thurman was President of Rhone-Poulenc Rorer Pharmaceuticals Inc., a global, research-based pharmaceutical company. Mr. Thurman was named by Ernst and Young as Entrepreneur of the Year in healthcare technology in 2007. He is currently Senior Advisor to New Mountain Capital, LLC, a leading private and public equity investment firm.

For the moment the company appears to be in good hands.  Thurman is a consummate executive.  The question remains what exactly was behind the move by Cohen?  Was he pushed out, does he have a possible opportunity and, if so, why would it be better than his previous position at CardioNet?  Investors need to play close attention to the recent management changes at the firm. Back in late September 2008 The Wall Street Transcript interviewed Sara Michelmore, Managing Director & Senior Research Research Analyst in the medical technology group of Cowen & Company.  In the interview Ms. Michelmore discussed CardioNet.  According to Michelmore,

CardioNet is a company that makes a mobile, outpatient arrhythmia monitoring system. It competes with some older technologies like Holter monitors and event loop monitors. It’s a really neat technology, a very high end piece of device equipment, with very high end analytical technologies at their service center. They’ve got a good amount of momentum right now; it’s a large market opportunity for them, probably in excess of $1.5 billion. Their penetration currently, of the cases that they would go after, is 5%. In the last 18 months, they have made some significant commercial strides, expanded their sales force almost 4 times and have had some really strong momentum recently in reimbursement coverage. It’s currently covered by Medicare, although they are also probably going to have a new CPT code that goes into effect January 1, 2009. And they have had a significant amount of new, private, commercial payers get on board with that company as well. We like that one; we think it’s a neat story and a good management team as well.   

It is odd that Cohen would leave the company now to pursue another opportunity just as the US Government is getting close to possibly putting huge dollars into the healthcare system. Stay tuned.  For more:  SOA World  Bizjournal.com    

In a surprisingly worded press release ING Group ING (NYSE), the Dutch financial service firm announced the current CEO, Michel Tilmant, would step aside as CEO today.  The release stated,

… in light of the extraordinary developments over the past few months and given his person     

al condition, Michel Tilmant will step down from the Executive Board as of today. Michel Tilmant will be an advisor to the company until his retirement from ING on 1 August 2009.

Tilmant leaves his position as the company continues to struggle.  The firm would not only lose its CEO it has also lost nearly 7,000 ING employees.  This comes all on top of a fourth quarter deficit of nearly 3 billion Euros.  The announcements were highlighted in today’s UK Times Online.  According to a story by Dominic Walsh in the Times Online,

A spokeman for ING said that Michel Tilmant, 56, would be stepping down as chief executive because of the stress of leading the group through the most turbulent period in living memory.       

“It has taken its toll on him,” the spokesman said. 

The company has selected Jan Hommen, the current chairman of the supervisory board of ING Group, to be the new CEO.  Hommen’s selection requires the approval of a general meeting of the shareholders scheduled for April 27, 2009. Until his formal selection is approved, the company has placed Eric Boyer, a member of the ING’S Executive Board, as the company’s interim CEO.  At this point it is difficult to get a handle on what Hommen will bring to the table that will be different from what Tilmant had brought to the management table.  Stay tuned.  For more:    Guardian  Investment Executive  CNN Wire   Forbes  France 24  Financial Week  

Though the current market climate continues to be gloomy, portfolio manager James Cullen of Schafer Cullen Management in New York sees a few reasons have potentially “very bullish long-term implications for the market.”

1. Attractive Valuations- “First there are attractive valuations. The recent decline in the market has now brought the market down to interesting levels for the first time in many years. We are assuming that S&P 500 earnings will drop 20% from the present level to $75 a share. With the market selling at 850, the S&P would be at 11 times earnings, a level we haven’t seen since 1974 and 1982.”
2. New President- “Then there’s a new President. President-elect Obama looks like he is going to hit the ground running with a new stimulus package. Equally important is the fact that most other countries around the world are also announcing stimulus packages, i.e., China, France, Germany, etc.”
3. Timing- “Third is timing. The government agency responsible for officially declaring when the recession started surprised many by saying the recession started a year ago. Looking at the history of recessions and their interaction with bear markets, a recession that lasts more than a year and a half is very long. The good news is that the stock market tends to turn up way before the recession ends.”
4. Cash- “Last is that there is more cash available now for investing by both US and global investors than ever before. To show how strong the flight to safety has
   been, one need only look at a recent Treasury offering in which the yield offer on the bonds was zero. This is the exact flip side of the risk spectrum relative
   to where we were with the NASDAQ at the top of the tech bubble.”

For our complete Investing Strategies Report, including a complete interview with Mr. Cullen, as well as interviews with portfolio managers in a variety of styles and focuses, click here.

For the last number of weeks Sony SONY (NYSE) and its CEO, Sir Howard Stringer, have been in the news.  Most of the commentary has been about the impending reorganization of Sony’s electronics business Sir Howard hopes to get implemented.  The controversy surrounding the reorganization has focused on Stringer’s attempt to make changes in Japan that would have a direct impact on Japanese employees who traditionally expect a job for life.  The Japanese have remained adamantly resistant to the proposed changes. The controversy has remained a major thorn in Stringer’s control.  Now comes news that Sony has forecast a whopping annual loss of nearly $3 billion.  According to Canada’s Gazette ”the loss would be Sony’s first annual loss  in 14 years”.  Could Stringer now find himself in the reorganization cross hairs? According to a story by Pavel Alpeyev and Junko Hayashi in Bloomberg,

Sony Corp. forecast a record 260 billion yen ($2.9 billion) full-year operating loss, almost four times analysts’ estimates, as the global recession cuts sales of televisions and cameras.   

… The outlook increases pressure on Chief Executive Officer Howard Stringer, 66, who is reorganizing the main electronics business after failing to meet his pledge to raise Sony’s operating profit margin to 5 percent. Recessions in Europe, Japan and the U.S. have cut consumer spending, while Sony lacks hit products that have powered profits at Apple Inc. and Nintendo Co.

While I expect Stringer to survive for now the dismal news, he needs to find a way for the company to come up with some product hits and to demonstrate to both employees and investors that he understands what’s needed for Sony to succeed going forward.  Keep a very close eye on what transpires at Sony for the next couple of months.  For more:   AP   Barron’s Blog   Bloggingstocks   Sonyinsider   Silicon Alley Insider    Forbes  LA Times (update 1/30)